Drumbeat: December 26, 2009

Ten years that shook, rattled, rolled and helped repair the world

Everyone expected resource wars as scarce petroleum and water supplies led nations and communities to battle over their access. That didn’t quite happen; something less violent but more dramatic did.

The threshold occurred early in 2006, when the price of oil, propelled by Chinese and Indian demand, reached somewhere between $55 and $60 (U.S.) a barrel. At that point, all at once, the world’s investors realized that other forms of fuel – notably from vegetable sources such as corn – could be refined and burned at the same price or less.

From that point onward, the price of food became directly linked to the price of energy. The two have followed one another up and down since, with huge repercussions. The global food riots of 2008, the first events of their kind in three decades, were a direct effect: The rapid rise in the price of grains hit the dinner plates of a billion people.

Iraqi and Iranian forces in oil well standoff

AMARA, Iraq (Reuters) -- Iraqi and Iranian forces are dug in on either side of a disputed inactive oil well in the sensitive border area, with Iraqis vowing to fight if necessary to fend off another occupation of the well by Iranian soldiers.

Iraqi troops say they will defend the well, where Iranian troops raised a flag for several days this month.

It is unclear how many troops are involved in the stand-off, but as many as 30 lightly armed Iraqi troops usually occupy border outposts in sensitive areas, and up to 10 in other areas. Some 11 Iranian soldiers are stationed near the disputed well.

Iraq Ministry to Visit Disputed Al-Fakah Oil Well Tomorrow

(Bloomberg) -- Iraq’s Oil Ministry and the state- run Missan Oil Co. are organizing a press tour to the disputed Al-Fakah oil field site tomorrow, the ministry said in a press release.

The delegation will visit all wells belonging to the field on the border with Iran with the aim of “delivering a clear picture to the public and clarifying the circumstances of the case,” said the statement.

Energy markets prove buoyant

For an industry tossed about by unprecedented oil price volatility, changing energy consumption patterns and a worldwide drop in fuel demand, the once unassailable energy sector demonstrated remarkable resilience this past year.

Al-Khafji oilfield projects bid deadline extended

KHOBAR, Saudi Arabia (Reuters) - A joint venture between Saudi Arabia and Kuwait has extended the bidding deadline for two projects at al-Khafji oilfield to Dec. 28, bidders said on Saturday.

The original deadline for both contracts was Sept. 28, but has been extended several times at the request of bidders.

Causes of energy crisis

There is only sufficient oil to last 44 years if oil production stays constant until it is used up. As oil reserves become depleted, there will be less which will make keeping production constant impossible. Likewise, there is only enough coal to last 133 years and only enough natural gas to last 61 more years. Certainly by now, everyone realizes that gas and oil will become expensive and scarce within the lifetimes of our children or their children. There will inevitably be a transition to more renewable energy sources. That transition may be haphazard or planned — it is on us to decide. 66.3 percent of the world’s gas reserves are in the Middle East and the Russian Federation. The United States have 3.4 percent. On the other hand, The United States consume 25 percent of the world’s oil and 70 percent of that is imported.

Age of Anxiety

Our sense of panic is only inflated by books such as Our Final Century, by Royal Society president Martin Rees, who lists bio-engineered viruses, asteroids, nanotechnology and nuclear war as among the many dangers we face. Tomes on peak oil theory such as Richard Heinberg's The Party's Over and The Long Emergency by James Kunstler take moral panic to pragmatic levels.

Perhaps this propensity for doom mongering is something of a cultural peccadillo, an impulse rooted in our Christian heritage and its prophecies of end-times and the Judgement Day to come. On the other hand, doomsday movies and books -- say, for example, Cormac McCarthy's The Road, or Stephen King's The Stand, or, my favourite, George Stewart's Earth Abides, a 1949 novel in which most of the human race falls victim to an airborne pandemic -- may provide a cathartic release from the undercurrent of anxiety that, in the words of British sociologist Phil Hubbard, "saturates the social space of everyday life."

Has The Left Missed The Boat On Climate Change?

Of course equally restrictive caps for all is unfair. But sensible people, and even sensible governments, understand this. The European Union has assigned lower caps to more developed member countries like Germany and France and higher caps to less developed members like Portugal and Ireland. Once it is understood that capping everyone does not mean the same cap for everyone it is apparent that equity can be achieved at the same time that erosion of global emission reductions resulting from failure to cap emissions in all countries is prevented. Moreover, there is no reason we cannot allow poor countries to increase emissions for some time, as long as the increase is capped.

Earth-Friendly Elements, Mined Destructively

GUYUN VILLAGE, China — Some of the greenest technologies of the age, from electric cars to efficient light bulbs to very large wind turbines, are made possible by an unusual group of elements called rare earths. The world’s dependence on these substances is rising fast.

Just one problem: These elements come almost entirely from China, from some of the most environmentally damaging mines in the country, in an industry dominated by criminal gangs.

Western capitals have suddenly grown worried over China’s near monopoly, which gives it a potential stranglehold on technologies of the future.

In Washington, Congress is fretting about the United States military’s dependence on Chinese rare earths, and has just ordered a study of potential alternatives.

Here in Guyun Village, a small community in southeastern China fringed by lush bamboo groves and banana trees, the environmental damage can be seen in the red-brown scars of barren clay that run down narrow valleys and the dead lands below, where emerald rice fields once grew.

Miners scrape off the topsoil and shovel golden-flecked clay into dirt pits, using acids to extract the rare earths. The acids ultimately wash into streams and rivers, destroying rice paddies and fish farms and tainting water supplies.

Oil price might rise "reasonably" - Saudi king in paper

RIYADH (Reuters) - Oil prices are stabilising and might even rise "reasonably," Saudi Arabia's King Abdullah was quoted as saying by a Kuwaiti newspaper.

The top OPEC oil exporter reiterated it saw a fair oil price between $75 and $80 per barrel, King Abdullah told the daily al-Seyassah in an interview.

"We expected at the start of the year oil prices between $75 and $80 a barrel, this is a fair price...Oil prices are heading towards stability and might rise reasonably," he said.

Indonesia likely to miss 2009's oil output target

JAKARTA, Dec. 26 (Xinhua) -- Indonesia may fall short of this year's oil-production target of 960,000 barrels per day due to technical problem, a media reported here Saturday.

Head of upstream oil and gas regulator BP Migas, Raden Priyono quoted by the Jakarta globe as saying that the total crude and condensate output is likely to reach only 950,000 bpd this year.

Russia fears gas problems with Ukraine, stops oil

MOSCOW (Reuters) - Russia has scrapped January oil exports via Ukrainian ports and also said it fears Ukraine will have problems paying for its gas, a sign of a possible repeat of New Year gas rows which have led to supply cuts in Europe.

No reasons for Gazprom to worry about Ukraine's ability to pay for gas - Tymoshenko

Kaniv, Cherkasy region (Interfax) - Ukrainian Prime Minister Yulia Tymoshenko has said she sees no reasons for Moscow to worry about Ukraine's ability to pay for natural gas imports from Russia.

"We have heard such statements at the end of every month for at least a year, and we, Ukraine, are confidently and steadily managing our financial affairs amid the crisis," Tymoshenko said at a Saturday news conference in Kaniv, the Cherkasy region, in commenting on Gazprom CEO Alexei Miller's Friday remark.

Clashes With Police Reported in Iran

TEHRAN (Reuters) - A reformist website said Iranian riot police armed with batons and tear gas clashed with opposition backers in Tehran who used a religious commemoration on Saturday to try to revive anti-government protests.

The opposition Jaras website said security forces fired warning shots in the air and tear gas to disperse protesters, and also attacked a building housing an Iranian news agency, ISNA, where it said some opposition backers had sought shelter.

If confirmed, the outbreak of clashes during a two-day major Shi'ite Muslim ritual would underline escalating tension in the Islamic Republic, six months after a disputed election plunged the major oil producer into turmoil.

EPA's regulatory grab invites court challenge

Green groups were heartened because they believe they finally have manufacturers right where they've always wanted them: vulnerable to piecemeal regulation by an activist EPA without deliberation by Congress.

Lawyers were rubbing their hands together in anticipation of all the litigation that will come their way as companies fight for their lives to be free of burdensome regulation. That's the way it's always worked in Washington.

Then, a few days later, an EPA official made clear the Obama environmental strategy with a clear ultimatum to members of Congress who might not be on board with the administration's cap and trade bill. Requesting anonymity, the official said: "If (Congress doesn't) pass this legislation," the EPA is going to have to "regulate in a command-and-control way, which will probably generate even more uncertainty."

China adopts law to boost renewable energy industry

BEIJING (AFP) – China's national assembly Saturday signalled the country's commitment to reducing greenhouse gas emissions by adopting a law supporting its renewable energy industry.

The new law, an amendment to one on renewable energy adopted by the National People's Congress standing committee, obliges electricity grid companies to buy all the power produced by renewable sources.

Natural Gas and Capitalism to the Rescue

The Marcellus Shale formation reaching from the Appalachians to central New York State illustrates why natural gas is enjoying a new popularity in the energy limelight. Just seven years ago, the US Geologic Service estimated recoverable reserves in the Marcellus to be 1.9 trillion cubic feet (tcf). Then in 2008 a pair of geologists -- Englander and Lash -- recognizing how successfully the hydrofracing technique was applied to the Barnett Shale formation in north Texas, upped the ante considerably. They estimated that the Marcellus formation might contain upwards of 500 tcf.

Factors of 250 don't come easily in oil and gas exploration. Besides heaping ridicule on the commonly repeated theory that we are living in the era of peak oil, these numbers suddenly brought great attention to non-traditional geological storehouses of natural gas. This is especially true since gas shales are distributed much more democratically than other hydrocarbons.

On the Edge with Max Keiser . . . and Gail Tverberg

Max Keiser interviews Gail Tverberg of http://theoildrum.com/

Electric Vehicles: 10 Predictions for 2010

A new era of electrified vehicles will soon be upon us. During the next decade, millions of vehicles that primarily run on electric power and are plugged in to be recharged will enter roadways.

Another decade down: Farmers face new challenges and old ones

Ten years ago, the likes of best-selling authors Michael Pollan (The Omnivore's Dilemma) and Eric Schlosser (Fast Food Nation), had not yet surfaced with their hard-hitting questions about modern agriculture, food policy and the linkages to public health. Pollan's influence on public perceptions has been so significant, some agri-industry donors have threatened to pull their donations if universities invite him to speak without also providing an industry speaker to counterbalance.

We'd never heard of a "locavore" a decade ago. And no one talked too much about the concept of "sustainability," a word that now peppers almost every dialogue related to food and agriculture. Biofuels were somewhat naively promoted as a solution to farm income problems as well as an answer for Peak Oil.

When it comes to sustainability, act locally

What will our local communities look like in 2025?

If peak oil is real, the supply of fossil fuels in the future will be severely limited and supplying it will be cost prohibitive. Cheap oil will be exhausted when the amount we can pump from the ground (or make from tar sands) is less than the amount we consume to run our economy. How will we heat our homes and gas up our cars and trucks in 2015, or 2025? How will we afford food grown thousands of miles away that needs to be refrigerated and shipped here? How can industries reliant on cheap oil continue to manufacture cheap goods and employ America's growing population? How will we get to work?

Mass extinction due?

If the course of human history is any model, then the wheels are already turning on Earth's sixth mass extinction, thanks to habitat destruction, pollution and global warming, a scientific analysis of millions of years of data reveals.

The study of the fossil and archeological record over the last 30 million years by researchers at the University of California-Berkeley and Penn State University shows between 15 percent and 42 percent of the mammals in North America disappeared after humans arrived.

That means North American mammals are well on the way -- perhaps as much as halfway -- to a level of extinction comparable to other epic die-offs, like the one that wiped out the dinosaurs.

from Another Decade Down

We'd never heard of a "locavore" a decade ago. And no one talked too much about the concept of "sustainability," a word that now peppers almost every dialogue related to food and agriculture.

Highlights what I often try to tell people - Change is slow, but relentless. It's like trying to see a tree grow. It will happen, it is happening, but you can't really see it from day to day.

Think how different things were at the end of 1999. We were all going to be Mutual Fund millionaires. Gas was cheap. Jobs were easy to get. Only a few lonely voices were saying "Be careful, this isn't going to last..."

I expect after the first of the year, we will see more businesses close up shop for good. They decided they would make it through the holidays, but when results were still disappointing, they decided that there is no point in working for no profit (or income to the owner).

Also governments will be more stretched by the lack of tax revenue. State and local governments are particularly in tough shape. State governments have been depending on government stimulus funds to keep going; local governments have depended on real estate taxes, and they are drying up.

Should be interesting to see what the real holiday retail numbers are like. Yesterday, half the articles were saying holiday sales were worse than last year, and half were saying they were better.

State and local governments are probably hoping for another stimulus from the feds. They need to raise taxes, but politically, it's very difficult in this economic climate. A lot of states are doing things like going after Amazon.com for sales tax. Sales taxes are the other main source of revenue for state and local governments.

Businesses have been winking out at a steady rate around here but there may be a flurry of closures around April, I say this because people get their tax refunds in Jan-Feb then buying can plummet after that.

Freezing my AZZ off here fingers and keyboard stiff, can hardly wait for my slick and quick manual typewriter in the future.

I think it's about time for a good "boil-up" as the hobos call it (a friggin HOT shower) at the gym.

The retail numbers will be mixed. Some are down as much as 10-12% and some are flat or up slightly. Inventories were very tight this year and costs have been trimmed to the bone. So, even if sales were down, costs savings are still helping the bottom line. This can't go on forever.

What you will see is an uneven effect. Some business will go down the drain, but there will be ones that find a niche and survive well at least in the short term.

Yes, you're probably right.

Around here, my impression is things are going well. The traffic is insane, and has been for months. It's not just the usual seasonal traffic (holidays, school starting, etc.) I haven't been to the mall for years, so I don't know how it's going there. But I haven't noticed any stores or restaurants closing recently.

I went out to friends yesterday, and the weather turned from 43 degrees F and rainy, to 24 degrees F and snowing in the space of a couple of hours.

Driving home on the expressway, the overhead electronic signs all read "drive slowly and carefully, and watch for icy conditions". Many people were - except for a small number of drivers who were weaving figure 8's around the other cars because everyone was just going too slow...

One guy doing about 80mph on a 55mph stretch missed me by inches...

An apt metaphor for our time, perhaps.

Driving home Christmas Eve, the highway signs in Kansas City said "Blizzard Warning: Travel is not advised". It's still snowing today.

Been watching this guy on the weather maps. Pretty amazing how the warm air was wrapping around the north side. Wisconisn, where I used to live was getting rain, while due south in Iowa was getting a blizzard. This system is also bring warm rain to the east coast area.

"What will our local communities look like in 2025? "

I listen to a Saturday morning radio program called "Living on Earth". Today's broadcast, "Forged in the Stars", includes a story about the "Voyager" space craft, which was sent out with a Golden Record of sounds from Earth - our "Hello, Hello" to the Universe.

Here's the url for the show :-


Worth an hour of listening time on a holiday weekend.

I asked myself the question - if anyone is out there, hears the recording, and comes to visit, what will they find ? Is that recording going to be all there is left as an archeological record of our time?

Happy "Boxing Day"....

2025, its only 14 years.
I expect almost all urban local communities to be more interconnected with
denser railway traffic, trams and trolley busses but only a little of the
high speed rail network will be finished although all of it will be building.
Its enough time for the biogas potential to be almost fully exploited and all
busses and light local distribution could run on it, its already one of the
most common bus fuels.
I expect that all public parking will have EV charging outlets but a lot of the
cars will still be old diesel, E85 and petrol wehicels.
There will definately be more bicycles and bicycle vacations will be popular.
Lots more local small scale shops and bars, especially in the major urban
centers where the densification of living is faster then the building of new
Better broad band and electronics but it will cost about the same.
Lots more low wage manufacturing jobs and the large shops for toys/electrinics/clothes
in fairly central industrial areas will start to be converted to manufacturing.
Good food will be a prestige consimption and more gardening will be done.

I think it will be fairly good times!

No surprise, internet use is up:

The increase in the number of hours spent online in the last two years compared to all previous years is striking. It probably reflects a growing ability to use the Internet, an increase in sites and applications, increased TV watching online and increased purchasing online. Also, hours online may have increased because of the recession. Going online is free; going out usually costs money.

The article misses some other reasons. The advent of cloud music being a big one. I stay on line practically during all my waking hours because of sites like songza where I let my play list run all day. So I would estimate I’m on the internet 14-15 hours a day, which is a lot for a 67 year old according to data in the article.

IMO people are abandoning television in droves. I abandoned it last summer during the switch to digital broadcasting. I suspect some others did too. Television sucks. The mind numbing programming and time wasting commercialism suck.

People are creating their own virtual worlds of entertainment and information. Why put up with media that do not meet your needs when you can make up your own that do?

The resulting fragmentation and isolation from others will increase though. I do not spend much time on sites that I disagree with. Thus even though the ability to communicate is increased dramatically by the internet, the reality is that it does not happen because it can’t be forced as it was with magazines, newspapers and television.

And certain formerly ignored small minorities such as atheists now can see that there a lot more like mined and are empowered to flex there muscles. They can now see and communicate where before the old media kept them invisible, isolated in the closet.

The new isolation is by choice. People will exist in isolated virtual reality communicating with like minded others as we do on TOD. Each will have his favorite sites and instead of the world ignoring him will spend his time ignoring the world in virtual bliss.


Regarding TV x I agree completely. It seems like the more channels there are the less substance is provided. Late at night most channels are selling some gadget, coins or watches. Why do I want to watch people pitch products? The funniest ones are the pitches for coins. "If you order now, I'll throw in this uncirculated Saqawagea dollar at no extra charge. My manager doesn't even know I got these out of our vault." Yea right.

I've noticed TV now works almost solely on the basis of distraction. During a football game we are distracted by the in between play huddle with stats, close up views of coaches faces, any kind of distraction they can find until the next play starts. Then they seem to feel its necessary to go in real close to the QB's face or the football itself, then out finally for a bigger view of the field, as the ball is hiked. Why do they think we want to see a close up of the QB's face?

The ads are so obnoxious that putting the TV on mute is not enough. I have to turn away from the TV to find something else to do. TV has become a lie. The promise was endless entertainment, and it has become endless distractions.

Long live the Internet!!!

Actually TV has become a lot *better*. Mainly because of HD & DVR.

Now I can record exactly what I want and watch it when I want. I don't remember watching live TV for a long time.

This decade would have been too painful but for likes of John Stewart and Colbert. Nat Geo and others have excellent programs that I record and watch all the time.

A very revealing document has just been released by the EIA.

Performance Profiles of Major Energy Producers 2008

The report is about the profit, costs and reserves of the 27 of the largest energy companies in the U.S. They are members of the EIAs Financial Reporting System (FRS) and a list of these 27 companies can be found here The combined income for these companies decreased to $87 billion in 2008 from $127 billion in 2007. However here is the part of the report that I found most interesting.

Average worldwide finding costs for FRS companies jumped 26 percent from the previous period to $23.84 per barrel of oil equivalent (boe) in the 2006–2008 period (finding costs are averaged over a 3-year period). The large decline in reserve additions noted above combined with higher expenditures resulted in a 77-percent increase in U.S. Onshore finding costs. The U.S. Offshore region ($64 per boe) and Europe ($61 per boe) had the highest finding costs among the FRS regions.

Lifting costs (also called production costs) increased 24 percent from 2007 to $12.59 per boe in 2008. Direct lifting costs increased 14 percent while production taxes rose 50 percent. Finding and lifting costs combined increased 24 percent from the prior period to $34.34 per boe in the 2006–2008 period.

That is a little confusing but it looks like finding and lifting costs, on land, is $34.34 per barrel while offshore it would be finding costs of $64 per barrel plus lifting costs or about $75 a barrel total. This puts an entire different light on things. If average production of U.S. offshore oil cost that much to produce then very deep water oil must cost quite a bit more and pre salt oil would cost even more.

If oil drops below $70 a barrel then a lot of oil companies would be losing money on every barrel of offshore oil they produce. And we are way further down on the EROEI curve than I ever imagined.

Ron P.

Very interesting find!

I wonder to what extent the "on land" costs reflect natural gas costs (converted to oil equivalents). Since natural gas sells for a whole lot less, and the calculation is somewhat different, the reasonably good land numbers may be deceptive.

One thing that surprised me was their exhibit 12:

The huge jump in US onshore exploration costs must reflect natural gas costs (not just Bakken costs). This is why I think the mix must be changing.

Gail, how does this fit in with your interview linked above: On the Edge with Max Keiser . . . and Gail Tverberg? You say, correctly, that the amount (of oil) that we can extract at a price that society can afford, becomes smaller and smaller. Also you talk a lot about credit. If credit is still very hard to obtain, and finding and lifting costs keep climbing, then what affect will this have on the future production of offshore oil? Or do the majors really worry about credit with all their megabucks.

Exactly where, in the finding, lifting and refining chain, does tight credit have the most affect?

Ron P.

Quote of the day by Gail Tverberg:

What we are seeing right now as a recession, I think of as a Peak Oil Recession. And that Peak Oil Recession is going to get worse and worse.

Ron, Gail, and all,

It's much worse than that! Peak oil represents the peak of gross energy (from oil). What counts as input to the economy is net energy. And the peak of net energy occurs prior to the peak of gross energy! In fact, by about 30 years.

I've supplied Nate Hagens with a copy of a summary paper about the significance of this fact for the economy. Perhaps it will show up here on TOD one day! The bottom line is that the economy starts to grind to a halt when net energy flow is in decline, after peak. If we are at peak oil today, then peak net from oil (and considering that oil is an essential fuel for extracting coal and transporting NG today) has already happened and we have fewer units of energy to work with each year.

Question Everything

Thanks George. It looks like the Great Recession will not get much better before it gets a lot worse. The Great Recession will likely soon turn into another Great Depression just a short time befoer we have total economic collapse. That will likely be the first stage of the Great Die-Off.

Have a nice day and a happy New Year. ;-) May as well laugh about it because there is nothing we can do to prevent it.

Ron P.

Purely in financial terms, without regards to additional external drivers such as resource constraints, the economic system is not in good shape at all. Just this weekend the US government lifted all caps on losses for Fannie Mae and Freddie Mac, saying on the one hand that they don't expect them to be needed yet admitting on the other hand that these two GSEs have only used about $100 billion of their earlier $400 billion lifeline? So why lift the cap if it's not expected to worsen? At the same time the government makes the following known as well:

The Treasury also relaxed its timeline for Fannie Mae and Freddie Mac to shrink their portfolios of mortgage assets. Previously, the companies were instructed to reduce their portfolios at a rate of 10 percent a year. Now, they will be required to keep the value of their portfolios below a maximum limit, currently $900 billion, that will go down by 10 percent a year.

This means they won’t need to take immediate action to trim their holdings and could allow them to rise. Fannie Mae’s portfolio ended October at $771.5 billion and Freddie Mac’s holdings at the end of November were $761.8 billion, according to the latest figures released by the companies.

“Treasury does not expect Fannie Mae and Freddie Mac to be active buyers to increase the size of their retained mortgage portfolios, but neither is it expected that active selling will be necessary,” the Treasury said.


This looks like preparation for further collapse in the real estate markets and Mark Hanson gives us evidence of why housing is still a disaster in progress.

And this is just in the housing market. John Williams, at Shadowstats, suggests that real unemployment, without playing games with numbers and categories, is close to 22%. Remember that unemployment peaked during the Great Depression at 24% in the United States. But in other nations it was even worse.

And then there is the ballooning deficit. Eric Sprott and David Franklin recently asked Is It All Just a Ponzi Scheme? Zero Hedge just followed up on Sprott’s thesis by asking Are Hedge Funds Responsible For The Missing Half A Trillion In Treasury Purchases? Their answer is no, which leads to the question of just who is buying all this government debt since it can be demonstrably shown that China has not changed its US dollar holdings much at all since April 2009. So who has purchased nearly $600 billion in additional US debt? It's starting to look like a Ponzi scheme being run by the Federal Reserve itself.

Thus, there is strong evidence that the economy is not at all in good shape and that it may be time to Brace For Impact: In 2010, Demand For US Fixed Income Has To Increase Elevenfold... Or Else.

And all of this sits on top of any resource issues or ecological issues, which would worsen things even more. I hope your assessment is wrong, sir, but hope often clouds the human mind.


My hypothesis is that the financial system is in the state it is BECAUSE of the resource limitations of fossil fuels! We have reached a phase in which the necessary continuance of growth in hard asset production has come to an end. I say necessary precisely because the whole system IS a Ponzi scheme. Unless you are growing the asset base there is nothing that you can do to pay back the debt created. Diminishing energy flow == diminishing asset production (along with failure to maintain current long-term assets). What we witness as a failure of the financial system is just the symptoms of diminishing energy inflow.


That is essentially the same hypothesis put forward by Nate Hagens in a prior essay, is it not? Given that there are physical limits to growth the only problem comes in accurately calculating when our current behavior patterns hit that wall. But regardless of the timing, a deep recession/depression would seem to be a probable outcome of a system in severe crisis. Given that the first decade of the 21st century was The Worst Decade for Stocks ... Ever, this would add evidence to such a thought.

However, I still come back to pattern matching and assessing this recession versus past credit bubble recessions. This one bears a large resemblance to prior credit bubbles bursting when such resource constraints had not yet been hit. In a prior campfire paper, an author suggested that the resource issues caused this recession. I countered that the predominant evidence was that the buildup of credit caused it. I asked that author for further evidence that would somehow show that "this time is different" but none of the evidence presented seemed convincing enough to me to abandon the more typical explanation of a credit bubble bursting.

So I put the same question to you - what evidence can you muster that this time is different? There are suggestive bits and pieces and I understand the desire to fit those bits and pieces into a whole framework for viewing the world. But I don't see convincing data that allows me to make that leap yet. You, Nate, and others may wish to pursue as many avenues as possible for verifying your assertion. Such evidence would provide a good way to convince at least some people of your position. Your position has an intuitive attractiveness to it but as I said, I'm not yet seeing sufficient data to support that claim.

George.Mobus: "My hypothesis is that the financial system is in the state it is BECAUSE of the resource limitations of fossil fuels!"

David Ramsey: "That is essentially the same hypothesis put forward by Nate Hagens..."

And Gail Tverberg: "What we are seeing right now as a recession, I think of as a Peak Oil Recession. And that Peak Oil Recession is going to get worse and worse."

Ron P.

Nate and Gail and I (with Charlie Hall) are all saying essentially the same thing. My approach is to look at the fundamental basics in biophysical terms, somewhat ignoring the details of finance which, for me, can muddy the waters.

As for what is different about this bubble burst I offer the following:

The whole of the economy can be encapsulated in this one concept called assets. All assets can only be produced and maintained by doing physical work which requires energy flow. Diminish the energy flow and you diminish the capacity to do work. It really is that simple.

Gail's point is that committing to doing work requires some form of debt financing which is borrowing work from the future. During the phase of growth in net energy (green phase) it is entirely possible to borrow from the future because, by past experience, there would always be more assets produced (to pay back the loan with interest) in the future. But as we moved into the yellow phase the situation changed. There would be less and less work accomplished in the future so the ability to pay back loans became less. Finally, in the red zone the accumulation of assets stops and changes to decay.

Nate has noted that money is really a marker for energy flow. The same is true of debt in general. But the energy flow precedes the creation of markers for future work. You have to have increasing energy flows in the future in order to be able to make promises to do more work.

During previous times, when financial bubbles expanded, they were just periods of asynchronicity in a specific market arena (e.g. housing or stocks) with the actual flow of energy. But there was always more energy flowing so even when the bubble deflated, it was against a background of potential expansion somewhere else. So bubbles came and went while the whole system continued to expand. They were just glitches.

The situation is completely different when energy flow is contracting. There is nowhere else to go with one's investments. There is no cover for the "smart money" any more. That is what is different. I would suggest that you are paying attention to the surficial features of the financial bust. But this one is simply too pervasive to fit into the classical bubble model. I suggest that something truly fundamental is different this time. And that difference is that we have passed the peak of net energy flow.


Diminish the energy flow and you diminish the capacity to do work. It really is that simple.

I am going to have to remember that one. The most difficult things for some people to grasp are, in many cases, astonishingly simple.

Ron P.


The most difficult things for some people to grasp are, in many cases, astonishingly simple.

They are indeed.

But one of the simple things being left out here is the fact that the increase in the cost of energy is only a relatively small (albeit increasing) part of the economic picture. The vast bulk of economic value in circulation is in fact based upon the use value of land/location.

The property bubble - and bear in mind that the vast majority of new credit = money was created to buy property - was based upon massive increases in the price of location/land, and not increases in the cost of energy embedded in that location.

Increased energy costs - of power and transport - eventually affected the ability of individuals to service the hugely excessive claims over land/location which they had taken on. At that point we got Peak Credit.

So in that sense energy prices were no doubt the straw that broke the camel's back. But the principal load on the camel had very little to do with the price of energy, and everything to do with the price of location/land.

Which is indeed simple.

Thanks Chris, great article you wrote. I am going to save the link for further reference.

Ron P.

Chris -- Not arguing against any of your points especially how the economy set itself up for fall with very loose housing credit. But the housing bubble required two major inputs: credit and, obviously, the construction process. The relatively low cost energy flow allowed a building boom. Had the energy flow cost twice as much fewer homes would have been built (the "capacity for work") and not as many folks could have bought even with the loose credit available.

And that brings me to my main point: as critical as it is for society to reduce energy consumption in the face of declining resources many forget the inevitable. Energy flow = capacity to do work = a need for someone to do that work. Thus decreased energy flow = increased unemployment. And, yes, we can retrain all those folks but retraining requires increased energy flow. The same point could be made about switching a significant portion of the economy towards new green industries. But again the energy flow requirements are still there. And then that leads us to the current paradox: energy flow costs dropped after the oil/NG spike of '08. But the drop in energy didn't lead to a boom in the greens/alts. Just the opposite: economic support for such investments disappeared.

So back to simplicity: decreased energy flow = decreased capacity to do work = decreased need for employees.

Not sure I buy this. Perhaps the ergamines - energy slaves - will be replaced by human ones.

It's less efficient, to be sure, but if you have a lot of unemployed people and not much diesel, the superior efficiency of a bulldozer over a bunch of people with shovels won't matter much.

My guess is it will depend entirely on well we adapt to the new reality. We still have to build a lot of hand tools and learn manual skills. For people in developing countries this might be less a problem. But for many in the developed world it might not be so easy. How we actually adjust to diminished energy flow is going to be interesting to watch. But I suspect it will be hard to make any sweeping predictions.

"So back to simplicity: decreased energy flow = decreased capacity to do work = decreased need for employees."

= need for laborers (a different kind of employee).

But laborers to do what? If huge parts of the economy that kept people employed have simply vanished, where is that labor needed?

Of course, I can think of various new projects that could be done and need doing (insulating houses, for one). But starting up new enterprises and training people to do them requires capital (credit) and energy, both of which are in dwindling supply.

Rock is, as usual, quite right here.

Historically, over 90% of the population worked in agriculture. Their work will be in feeding themselves, and the few "elite" a solar-powered society can support - doctors, priests, kings, scientists, or lords of the manor.

Mightn't increased efficiency, conservation, & "mining" of waste increase (or at least stabilize) net energy flow even as gross energy flow decreases?


There is nothing that can be done vis-a-vis net energy flows other than buy a bit more time with renewable energy sources if we do all that you suggest and redirect much (perhaps most, given the scale of the problem) of our new asset production to that energy infrastructure. Even then I don't expect we will change the overall shape of the curve. In this model energy costs (in energy units) are a function of the assets directed at energy extraction and refinement (also conversion to usable forms, e.g. electricity). They increase as we increase those assets.

But a direct answer to your question is that no, net energy cannot even stabilize if gross energy is diminishing. The best that we could hope for is, by somehow increasing the efficiency, etc., of production (lowering the cost curve a bit) we can bring net energy closer to the gross curve. But it will still have the same behavior as the graph above suggests. It's the old no free lunch part about the 2nd law.


Thanks for the reply, but I was merely addressing what Rockman wrote: "decreased energy flow = decreased capacity to do work = decreased need for employees."

Perhaps I should have said that the steepness of the decline in net energy can be mitigated with conservation & efficiency measures, thus lessening the decreased need for employees.

I agree that this won't change the overall shape of the curve except for the far right hand side. Of course I understand that the graph is merely illustrative and truncated at some point in the future, but it seems to me that the net energy second derivative will have to turn positive at some point before net energy reaches zero, leading to a long tail of considerably reduced but non-zero net (from renewable sources) energy which will be greater the more efficient the utilization.

It won't be anything like BAU, but greater efficiency of utilization will result in a higher floor for the collapse.

Interesting inputs from all. Efficiency improvements are great. But such improvements also mean less need for workers. Higher efficiency = more output/worker = less jobs. A poll to make my point clearer: all those on TOD who can keep their current jobs (along with ALL their co-workers) if the energy flow to their efforts is cut by 30% please raise your hands. Hmmm. So all those who didn’t raise your hands: What manual labor jobs are you skilled to perform and, much more importantly, who will pay you to do that work?

I believe we’re facing a problem to which there is no solution. Just adjustments. And very painful adjustments. Manual labor is not as efficient as mechanical labor…obvious to all. Thus to achieve the same out put more manpower will be required. To maintain the same profitability either the producers will have to charge much more (in the face of a declining population income?) or pay much less per person. Lower societal income = lower purchasing power = good for energy conservations = less jobs.

And yes, the BIG IF which is totally irrelevant: IF we had started to modify our economy 30 or 40 years ago maybe the adjustments wouldn’t be as painful. But we didn’t. I see no other way at this point to minimize the negative effects of PO then more coal burning. And I fully expect the industrialized economies to readily accept drowning all the coastlines as collateral damage. As others have said before: BAU is not sustainable without great sacrifice. The question is who will make that sacrifice? The powerful or the weak? I think we all know that answer.

What manual labor jobs are you skilled to perform and, much more importantly, who will pay you to do that work?

I think we're already seeing that happen. Bankers who are working as carpenters, engineers working at gas stations, etc. Me, I could probably get a job doing farm labor from family or friends of family. I also have a lot of food service experience.

My guess is the government will pay people to do work. This is common in developing countries. People will be paid to do things like clean the streets.

In particular, the government could offer jobs on farms, in lieu of or along with food stamps. Before the industrial age, over 90% of people worked in agriculture. I suspect this is the reality we will be going back to, though it won't be quick or easy.

"...the government will pay people to do work. This is common in developing countries... in particular, the government could offer jobs on farms..."

Ah, "the government", that all-powerful deus ex machina, that great free-candy machine in the sky. But a lot of those developing-country governments run on foreign aid - and under the conditions we're discussing that will largely go away. Nor will it ever be available to developed-country governments, which are now the 'outside' everyone else turns to, but have no 'outside' of their own to turn to. So all I see down that road is a bunch of ice worms eating each other:

And as no nourishment they find,
to keep themselves alive.
They masticate each other's tails,
till just the Tough survive.

It's clearly not sustainable in the long run.

In the medium run, however, I am expecting a resurgence of socialism. Funny how people stop thinking it's freeloading when they're forced to do it.

And it needn't be the federal government. There used to be "poor farms," set up by local governments or parishes for the indigent.


My model does not use monetary values, so we are not talking about a dollar value of energy costs. All units are energy units. Assets are measured in emergy as a stock.

Sooner or later it will be recognized that money in all its forms has been decoupled from underlying true value which is based on the capacity to do useful (desired) work. Hence, from my POV, models including explicit monetary flows cannot get at the fundamental basis for what we are witnessing.

To see simple relationships I like to keep things simple.

The pervasiveness of the credit bubble collapse during the Great Depression arguably exceeds this one, at least so far. The multi-decade fallout of the South Seas bubble likewise permeated the entire global trading system at that time. I am not prepared to accept the simple argument of pervasiveness as proof that this time it is different.

I admit that you have an interesting hypothesis but it simply still seems, to me at least, to be insufficiently proven. How do you prove that solar can never supply the energy necessary for continued economic expansion, for example? Because that is basically your argument - that fossil fuel provided energy levels will never be replaced or exceeded by other forms of energy such as solar, nuclear, etc., and therefore that debt issuance, which is dependent on net energy flows, cannot continue.

I am not prepared to accept the simple argument of pervasiveness as proof that this time it is different.

Nor should you. Pervasiveness is not just geographical extent, it is also temporal. Let's see how long and drawn out this process is. The evidence for this theory is very much like the evidence for global climate change. It will take a while for the depth and pervasiveness to be recognized empirically. Unfortunately, we have never tried to keep track of net energy. My whole point is that in paying attention to gross energy peaking as the harbinger of civilization's unwind we have missed the actual event where such unwind started.

BTW: proof is something you do in math, not science. As for evidence that solar cannot replace fossil fuels, I hardly stand alone in this assessment. Take a look, for example, at Vaclav Smil's work. There are a growing number of scientist/systems engineers who are working out the scale issues (time and space) as well as the power factors relating to collecting and making solar input into usable exergy. And they are pretty much coming to the same basic conclusion. You won't be able to replace fossil fuels at the level of power consumption our civilization uses now and you for certain won't be able to grow an economy on solar.

That doesn't mean we shouldn't pursue a solar-based energy infrastructure (even if it turns out that distributed beats centralized). Food production is, after all, a solar energy input to our biomass assets. What it will come down to is far fewer people living within a solar budgetary means, which is yet to be determined, but clearly not anything like the means fossil fuels have afforded us. We will need to find the steady-state condition that Herman Daly suggests.

If I am right about this we will, in the future, no longer think of debt as borrowing from the future. Rather we will go back to the original idea of borrowing from accumulated excesses in storage for short-term purposes to smooth out the fluctuations in energy flows that are normal for the Ecos. Savings during good years, living off of savings in bad years. Again, very simple.

But for the foreseeable future, steady state won't do it.

We desperately need a "declining-state" economic model even to understand clearly what will be happening in the coming decades. Is any such model being developed to anyone's knowledge, besides the erudite ramblings on this forum?


Those are really nice links.



You are welcome, Gail.

The credit issue has multiple impacts:

1. It is the buyers of houses, cars, and other things that are most affected by credit cutbacks. These products that consumers stop buying products using oil (and a lot of other natural products) in their manufacture. The lower demand results in lowers prices for natural products of all kinds, including oil.

2. With the lower price, oil and gas producers have lower cash flow. Because of lower cash flow, they have less money to invest in new development. So there is less new development (especially natural gas, but also the smaller oil companies, and Gazprom, Pemex, etc).

3. There may be direct credit impacts for oil and gas companies as well. This particularly affects smaller companies and contractors, but this is not the major impact. It is the indirect impact through the lower cash flow due to lower price that is the issue.

A lot of people think that oil prices (and natural gas prices) can keep rising. But the impact on people's incomes, and then indirectly on credit, really means that once prices rise high enough, they trigger a further credit unwind, and this brings price declines.

I believe you’re correct Gail. Though conventional NG drilling costs rose due to demand for rigs, etc just as costs for the shale gas plays did, the SG plays also incurred a significant change in drilling profile. Initial SG wells had 1 or 2 fracs. By late ’08 12 or more fracs per well were not uncommon. It was common for the frac’ing stage to costs more then 2 to 3 times the drilling costs. The increase in frac stages did greatly improve the probability of commercial success but at a significant increase in costs. As a result the economic value of some SG plays had declined to near marginal levels even when NG prices exceeded $9/mcf. Consider Devon’s east Texas SG play again: when NG prices fell below $5/mcf they dropped 14 of their 18 rigs in the play in just 6 weeks. And paid a total of $40 million in cancellation penalties to do so.

And now we’re back to a basic paradox: increased oil/NG prices = increased drilling costs = increased supplies = decreased prices = smaller margins = less drilling = cheaper drilling costs etc etc. Even though NG prices are much lower now then they were in early ’08, the exploration economics are still very good… in some ways even better. We just spudded shallow water GOM deep wildcat that had an estimated dry hoe cost of $23 million a year ago. Current cost estimate is $12 million. Obviously the probability of success and the reserve target haven’t changed. Even some SG play economics could look better. Besides the drilling/frac’ing costs falling, access costs to leases have been greatly reduced…in some cases to zero. Two weeks ago I reviewed a proposal from a company that had paid $11 million for SG leases that will expire in 14 months. The company had planned to recover these costs when they sold drilling rights to other players. The others players are not playing for the most part in E Texas at this time. And the ones that are still playing are drilling their own leaseholds. Now company will sublease the acreage to anyone who will drill a well. They’ll eat the $11 million loss. In return they get a small interest in the wells after the capex source recovers their drilling/completion costs. Thus even with lower NG prices the drilling economics are not as bad as some might think.

And oil prices are another matter. This is especially true with respect to NG plays that have a high NGL yield. There has been a drilling boom going on in some plays in Texas that hasn’t slowed down nearly as much as other NG plays like the SG. We’ll spud a NG wildcat (100 bcf target) in a couple of weeks. We committed to the well when NG was less then $4/mcf. But there’s also 20 million bbls of NGL associated with the prospect. Needless to say we’re tickled with the oil price these days. We bought this prospect from a generating geologist that couldn’t find a company with drilling capital. About 18 months ago he could have sold this deal over the phone to anyone of a dozen companies. The lack of capital/credit has shut down many companies. We’re not doing anything that every other company would be doing if they had access to the money.

This is not a new phenomenon. It has been so since I started in 1975: The worst profits result from drilling during boom periods. The best come after drilling/acquisitions during the bust. The ExxonMobil acquisition of XTO is just another example. Expect more such scavenging; Devon has already announced it will be selling all its Deep Water and international properties over the next year. Can Chesapeake be that far behind? The strong buy the weak. And next time the oil patch booms there will be that many fewer players. Even though there’s an ever-decreasing number of prospects left to drill the lack of companies/drilling capital might even be a bigger problem. Only time will tell where the real choke point lies.

Hi Darwinian,

For us amatuers who would rather be taken perhaps for fools right away than known for fools with certainty later, please explain this term "finding costs".

It sounds self explanatory , but that means nothing to me-I've been around other such terms before and the general rule is that such words mean something significantly different from one profession to the next.

What is included and excluded from "finding costs"?

Thanks in advance.

Mac, I am not an oil man but I think the term is self explanatory. Finding costs would be the cost of seismic work, expletory wells as well as dry holes. And one biggie in finding costs would be the cost to lease the area under exploration. Here is a pretty good definition:

The Enigma of Oil and Gas Finding Costs

A definition of the term "finding cost" is in order. By "finding cost," I mean only the expenditures on leases, geological and geophysical exploration, and wildcat well drilling. The drilling of field wells and equipping of leases and wells to produce comes under "development cost." Most of this paper refers to finding costs only, and excludes development and producing costs.

As new places to find oil gets scarcer and scarcer, a lot of leased fields, after a number of dry holes, never produce a single barrel, or at least that would be my guess. And all that expense would have to be added to the finding costs of the oil that is found.

Ron P.

This is a great document that introduces the oil and gas industry for financial analysts in the equity research business of UBS. Info on finding costs is on page 44.

I have an old hard copy of this that I used to refer to, and just stumbled on this electronic version.


I notice a discrepancy on the Oil Megaprojects wiki between the values on the front page and what I get by tallying projects in given years.

Front page values:

2009	4345
2010	3660
2011	3735
2012	3259
2013	2545
2014	1820
2015	1255
2016	1095
2017	162
2018	180
2019	50

Values from tallying:

2009	4742
2010	3230
2011	3114
2012	2275
2013	2400
2014	2350
2015	2830
2016	1085
2017	162
2018	130
2019	0
2020	200

Giving a difference between front page and tallying of

2009	397
2010	-430
2011	-621
2012	-984
2013	-145
2014	530
2015	1575
2016	-10
2017	0
2018	-50
2019	-50
2020	200

This would reflect the delay of Manifa to 2015, etc. I built up my spreadsheet a few weeks ago so this is possibly somewhat out-of-date. It is noteworthy that 2010 is yielding even less production than before; it was looking to barely offset a 4.5% decline rate, and now likely won't, meaning spare capacity will have to be brought online to stay afloat.

I notice that, when charting projects month-to-month for 2009 and throwing in the monthly average WTI price, Khurais Ph 1 coming online in June seemed to temper the price:


Khurais Ph 2 comes online next month with another 600 kb/d, and the rest of the year is quite slim pickings. There are far fewer figures given for month of startup in 2010, but 2009 was more detailed - only about 4 projects didn't state the month. Hope this is of interest, and am looking forward to the next megaprojects update.

KLR, I have no idea what you are looking at. I copied and pasted the data into an Excel spreadsheet and then done a sum of the yearly figures. They came out exactly the same as the totals listed except for 2009. For 2009 the total comes to 4815 while the total listed is 4345. The error is in the OPEC totals. Summing OPEC for 2009 comes to 2935 while the listed is 2465.

That is an error, for 2009 only, of -470 bp/d.

Ron P.

470 kb/d is a lot of oil. I stand by my findings, did you copy/paste the tables today, recently, or half a year ago etc? I compiled my spreadsheet on the 6th. Perhaps they diverged drastically then but have reconverged perfectly since, which would be exceedingly unlikely.

All this is indicative of is a problem with the script compiling the front page. I myself made an addition to the 2010 tables (Connacher's 10 kb/d Algar bitumen project), yet the front page still says the last update was in Nov '08. I'm not sure if it was reflected in the couple of weeks since I made the addition.

KLR, I just clicked on your link and got the latest version. I copied and pasted the data just minutes before I posted. And I stand by my point that your data is simply wrong. A quick glance at the data can verify this. Look under 2019 and you see only "50", for 50,000 barrels, from Canada. You say there is "0" under 2019. Then look under 2020 and there is absolutely nothing. You say "200".

I am still scratching my head and wondering what you are looking at. Here is the link again:
I find it very strange that this same link loads a different page for me than it does for you. The link should be the same for everyone. I think you probably copied the data wrong.

And yes the last major update was likely November of 2008 but look at the very bottom left hand corner of the page and you will find this:

This page was last modified on 10 October 2009 at 05:57.

Note: If you use Internet Explorer you can copy and paste the data directly into Excel. If you use Firefox however it puts everything in the same cell. I use both. Sometimes I find IE better and other times I like Firefox better.

Ron P.

That's quite odd, because under 2020 I see:

Country 	Project Name 	Year startup 	Operator 	Peak 	
Mexico 	(Chicontepec) Exp 3 	2020 	         PEMEX  	200

I'm tallying the peak values, FYI. This gives 0 for 2019, yet Joslyn Ph 3 is shown, with "50 kb/d FID," i.e. final investment decision; so this is a tentative prospect, if I understand correctly. The Joslyn projects are laid out in an odd fashion, Total themselves say 100 kb/d startup in 2014 and Ph 2 for a further 100 kb/d four years later: Total Canada: Joslyn Overview. Wiki says 50 kb/d in 2014 and three additional phases later on.

The reference given is a scribd document from a company called Strategy West, last updated in February; here's their page with a December update of the same doc: Canada's Oil Sands. This is more useful as well, since the scribd doc doesn't allow searching for a term. Or maybe that's another bug on my end...at any rate their homepage is just as accessible and more up to date, and it still shows just 2 phases of 100 kb/d. Perhaps the wiki is including Joslyn in-situ, but those projects are canceled.

I use Firefox, didn't know about how IE could edit directly in Excel.

KLR, now I see where we differ. I was tallying the data listed on the main page and you were clicking on each year and tallying that data. I thought you were just doing a sum of the columns. Sorry about the misunderstanding.

Hope to see a new update for Megaprojects soon. I think there will be a lot of revisions.

Yes, if you use IE you can copy any HTML file directly into Excel and the data will go into different cells just as they are in the original HTML page. I started out originally using IE, then switched to Firefox. However I was shocked when I found out I could not copy from HTML into Excel. Everything you copy and paste goes into one single cell with Firefox.

I copy a lot of data. I have probably twenty Excel spreadsheets with oil production data, Rig Count data and other data pertaining to oil production. Most of the data I copy and paste is from other Excel files but I also do a lot of copying from HTML files. It only works if I use IE.

Ron P.

Ah, thought something like that was where the discrepancy arose.

I've plugged these retallied numbers into my own graph, using an advancing 1% increase in a baseline decline rate of 4.35% for 2009, which equates to -3718 kb/d for the 2008 annual production average of 85471 kb/d. Not the most rigorous way of doing this, but we are in the ballpark; it seems close to how Sam got the decline shown on this graph. The advance in decline rate was predicted by the IEA, as related in the TOD article on the WEO 2008. The statement about this was:

Our reference scenario projections imply a one percentage-point increase in the global avearge natural decline rate to over 10% per year by 2030 as all regions experience a drop in average fields size and most see a shift in production to offshore fields.

They make this statement, and then throw in a graph that shows anything but a 10% decline in 2030. Presumably the graph isn't of natural decline, thus they expect technology to mitigate things to a great deal. Or, once again, the right hand doesn't know what the left hand is doing at the IEA.

Also of course the statement is in regards to natural decline, and I'm extrapolating that to decline per se, i.e., after the industry has done its best. Not sure how to get the precise number out of that or if they correlate 1:1, but anyway here's what I get:


Looks like we've reached peak oil. Spare capacity, if it really is there, will be gobbled up in a few years. I'm not modeling any gain in consumption either, which will be necessary to grow the economy.

Date	Gain  Decline    Net    Decline Rate
2009	4742	-3718	1024	0.0435
2010	3230	-3755	-525	0.0439
2011	3114	-3793	-679	0.0444
2012	2275	-3831	-1556	0.0448
2013	2400	-3869	-1469	0.0453
2014	2350	-3908	-1558	0.0457
2015	2830	-3947	-1117	0.0462
2016	1085	-3986	-2901	0.0466
2017	162	-4026	-3864	0.0471
2018	130	-4066	-3936	0.0476
2019	0	-4107	-4107	0.0481
2020	200	-4148	-3948	0.0485

"Gain" = addition from megaprojects.

Those are some pretty frightening numbers guys. I expect the gains will grow a little as we get closer to 2015 but not enough to have a huge impact. Add to this the problem of declining exports and it really looks grim for importers like us.

Checking on everyone's cornucopian poster child, Brazil, we see the following: 2009 average production of 1,969 kb/d, vs. 1854 kb/d for 2008, a gain of 115 kb/d. Yet they brought on 465 kb/d of production - most of which claimed to peak in 2009. And Leanan has posted stories about shrinkage of Brazilian consumption this year, too. I believe the annual data for that from the EIA is updated Jan 1.

Brazil is shooting for 2.25 mb/d in 2010, according to Petrobras; yet megaprojects are only 375 kb/d. If the same declines and consumption increases obtain next year that will leave them at a mere 2,072.75. And this place is touted as the new North Sea! Even larger gains were brought online in '07/'08, to little discernible effect. Contrast with the UK averaging 172.29 kb/d increases each year 1981-1986.

Note: If you use Internet Explorer you can copy and paste the data directly into Excel. If you use Firefox however it puts everything in the same cell. I use both. Sometimes I find IE better and other times I like Firefox better.

When using Firefox highlight the html data you wish to copy and do a (CRTL + C) then switch window to MS Excel:

Highlight the first cell in your spreadsheet and chose "Paste Special" under the Edit drop down menu, then select then radio button for "Unicode Text". Should work ;-)

Paste Special

Another feedback loop has occurred to me after talking with a diverse group of people at a Xmas party.

One of the big problems is the fact that mankind is so removed from nature. As the natural world becomes more and more devastated and the environment more harsh to live in people are becoming MORE disdainful of it. Instead of seeing all the images of distruction and getting the warm fuzzy feeling that one might get when seeing a wounded animal, people are repulsed and are turning further away from nature and becoming more immersed in fantasy and technology.

Yet if you talk about the wonder and beauty of nature, or show images of that, people then feel that there is not a problem.

OOps! another enigma.

From the article above, Causes of energy crisis, is this gem.

There is only sufficient oil to last 44 years if oil production stays constant until it is used up.

I find the logic for that kind of thinking fascinating! It presupposes so many falsehoods. 1. production will stay constant, 2. it ignores eroei, 3. thinks of oil reserves as a bank account that can be consumed uniformly until it is completely gone, 4. Depletion is uniform, 5. No economic problems resulting from approaching zero supply, 6. No hoarding by exporting countries that want to hold on to some of the energy for themselves in the face of sharp depletion, and 7. it doesn't even supply the math for how he got to 44 years of oil supply!

Like I said, fascinating!

Actually right after that he gave all the reasons that production wouldn't stay constant. My biggest issue is that he states these numbers very precisely. The reality is we don't have a good handle on the size of reserves, he's probably just taking published values as correct.

You're right, he has it all wrong. About 1.5 trillion remaining and using it up at about 25 billion a year, it should last 60 years at least unless there is a leak somewhere in which case it will be used up quicker. :-)

Global oil consumption is far closer to 30 billion barrels annually than 25. In fact, according to the IEA at current consumption rates of 84.9 million barrels per day, the world will use approximately 31 GB (30.988 GB) for 2009. For global consumption to be as low as 25 billion barrels per year, consumption would have to drop to about 68.5 million barrels per day. Unless you have evidence of an imminent catastrophic decline of 16% in global supply, a more reliable working figure for the present would be 30 billion barrels per year.

Global oil consumption is far closer to 30 billion barrels annually than 25.

This is just more confusion from our use of "all liquids" verses "crude + condensate". Annual C+C consumption is about 26.5 billion barrels per year while all liquids consumption is about 31 billion barrels per year.

So if you intend to quote world oil consumption you should make it clear whether or not you are including bottled gas, biodiesel, ethanol, palm oil and other such liquids that are included in the "all liquids" category. And don't forget "refinery process gain" which is also added in the "all liquids" colum.

Ron P.

Thank you for the clarification, Ron.

Lynford, you're making the exact same mistake as the author of that article. You're taking an estimate of oil reserves and dividing by a certain amount of consumption to get years of use.

Oil was super cheap, then it was cheap, then it cost more and now it is 75-80 a barrel and a major factor in causing this long recession. What happens to the ecoomy 2-3 years down the road when it's 120 a barrel? What happens as depletion increases? There are so many factors you can't presume it will all get used. Most likely there will be a trillion or more barrels left in the ground when SHTF.

China Launches the Worlds Fastest Train

This line runs between Guangzhou and Wuhan, a distance of 1,069 kilometre with an average speed of 350 km/hour. In my opinion, this train has a competitive advantage versus aircraft over that distance.

Here's a different link:


It's a disgrace that the U.S. is so far behind other advanced countries on highspeed rail. I guess that American's hubris won't allow them to see how far behind we are on so many important things, how we have collectivly dropped the ball.

BEIJING (AFP) – China's national assembly Saturday signalled the country's commitment to reducing greenhouse gas emissions by adopting a law supporting its renewable energy industry.
The new law, an amendment to one on renewable energy adopted by the National People's Congress standing committee, obliges electricity grid companies to buy all the power produced by renewable sources.

I wonder if this law has more teeth than similar regulations in the U.S. Most utilities here have so many loopholes in their programs I stopped considering them years ago.

Ghung - The highway system in the U.S. developed in the wake of WWII particularly in the SW. Towns, neighborhoods and cities grew up around those freeways and everybody drives. Consider that the average density in L.A., one of the US's most populous counties, is actually quite low in comparison to European or Asian densities. If you're unlucky enough to have to take public transit in L.A. it can take two to three times what you would spend even in heavy traffic. How do you connect all of that sprawl?


Most highspeed rail systems are used more like airline travel, connecting regional hubs. Other forms of transportation are then utilized into surrounding areas. Example: Dallas to Austin to El Paso to Tucson to Phoenix to Flagstaff, etc., and so on, not stopping at every town.

Looking at the sorry state and questionable future of the airlines, what would you propose as an alternative to regional or cross-country travel (especially when jet and motor fuels get really expensive)?

BTW, I can think of nothing that would be cooler than a highspeed, ground level tour through NM and AZ. I was a young hobo in the mid seventies and road the rails in boxcars through the SW for a time. Lifetime experience!

"what would you propose as an alternative to regional or cross-country travel"


If you're unlucky enough to have to take public transit in L.A. it can take two to three times what you would spend even in heavy traffic.

Commuting from Pasadena (Mission Station to Union Station via Gold Line, then Red Line to the stop closest the courts) via train to jury duty at the Superior Court was consistently as fast or faster than those other jurors that had to drive and find parking, in April of this year, from my personal experience.

At that time gasoline was averaging US$3.50/gallon, so the US$17/week for the transit pass saved money, too.

To be fair: It all depends on where you need to go, and what times, and also what things are available. For that route, I found public transit a better choice.

If in the Los Angeles area that want to try and see how it might be for you, try the trip planner at http://mta.net

If you're unlucky enough to have to take public transit in L.A. it can take two to three times what you would spend even in heavy traffic. How do you connect all of that sprawl?

The original freeway plans, designed in the 1930s, include a set of light rail tracks in the median of every freeway. That would have done the job nicely. Unfortunately, it was never implemented.

Los Angeles made a serious wrong turn after WWII, when it built its current freeway system with no provision for rail transit. The urban development has been at a much too low population density to support an efficient public transit system, and there has been little or no provision for interconnecting the sprawling suburbs with an efficient bus and rail system such as you see in Europe.

After urban areas have all been built around a car-only model, it's very difficult to correct by retrofitting transit. Wouldn't it have been nice if they had followed the original plans and put rail tracks in the median of every freeway?

It's widely known that GM conspired with other companies to kill electrified public transit in the US. Here's one commentary.

In a 1922 memo that will live in infamy, GM President Alfred P. Sloan established a unit aimed at dumping electrified mass transit in favor of gas-burning cars, trucks and buses.

Just one American family in 10 then owned an automobile...

But GM lost $65 million in 1921. So Sloan enlisted Standard Oil (now Exxon), Philips Petroleum, glass and rubber companies and an army of financiers and politicians to kill mass transit.

Capitalism (and PR) at it's finest. Did you "See the USA in a Chevrolet" (or Hummer)? Will your grand children be able to do that? Yes folks, we're in The Great Recession, so lets build some more miles of freeway, shovel ready or not. Sad to say, we are digging our own graves...

E. Swanson

It was Standard Oil of California (Chevron) that was convicted, not Standard Oil of New Jersey (Exxon). By that time, the old Standard oil monopoly had been broken up into 20-odd different regional companies. Phillips Petroleum was also convicted, as was Firestone Tire.

At one time, Southern California had the largest interurban electric railroad system in the world. The GM/Chevron/Firestone conspiracy was one of the reasons why it was dismantled and replaced by freeways.

Between 1936 and 1950, National City Lines bought out more than 100 electric surface-traction systems in 45 cities,[4] including Detroit, Cleveland, New York City, Oakland, Philadelphia, Phoenix, St. Louis, Salt Lake City, Tulsa, Baltimore, Minneapolis, and Los Angeles, and replaced them with GM buses.

For more details see: http://en.wikipedia.org/wiki/Great_American_streetcar_scandal

The politicians were not guiltless, of course. In 1935 they passed a law preventing electric utilities from owning streetcar lines. Up until that time, the utilities had owned numerous electric railways and sold them electricity at a discount. Naturally, they had a vested interest in keeping them running, even at a loss. After the act, they had to sell them off, and of course GM et al bought them up and shut them down.

See: http://en.wikipedia.org/wiki/Public_Utility_Holding_Company_Act_of_1935

There was also another factor - do you have any idea how much the Pacific Electric - the main interurban in question - was hated? Probably as much as the Vanderbilts in their day. It decided where people could live, where they could go, and at what hours they could go. They resented that and saw cars and roads as a liberation. It's not entirely down to just wicked executives and corrupt politicians. (It's also not clear anyone unambiguously anticipated the traffic jams until much later...for example the model cars in the 1939 World's Fair motorway exhibits were apparently all moving unimpeded...)

The flipside of course is that now, roads decide where you live (freeway close?), where you can go (no ring-roads where I live. All major arterials bar one got through the CBD), and at what hours you can go (peak hour is gridlock).

"No one could have predicted..." ;)

Even we antipodeans have managed something: http://en.wikipedia.org/wiki/QR_Tilt_Train
We just need to build more of them.

RE: Ten years that shook, rattled, rolled and helped repair the world.

Quite the optimistic article:

  • Yes, the last decade has been a mess, but
    "There has been another more important decade. It is the decade we missed. [This decades] wars and acts of terrorism have been symbolically significant, but limited: They engaged, directly and indirectly, perhaps 2 per cent of the world’s population, during a decade when there have been fewer conflicts than at any time in modern history."
  • Yes, places like Afghanistan are a mess, but
    "the states that seemed most likely to fail – the former Yugoslavia, Nigeria, Indonesia, Chile and Russia – spent the decade mending themselves into relatively stable places".
  • Yes, institutions like the WTO are a mess, but BRIC (Brazil, Russia, India, China)
    "Accounting for 43 per cent of the world’s population, these formerly unstable countries saw the rise of sizable middle-class communities, economic growth rates typically exceeding 8 per cent a year and huge improvements in standards of living in all income groups."
  • Yes, the bursting of the economic bubble is a mess, but
    "In three entire major regions which had declined from the 1980s to 2000 – Africa, the former Communist world and Latin America – they have all returned to growth, and had an amazing period for seven years, quite substantial growth rates between 2000 and 2007."


    "Public health, education, life expectancy, infant mortality – almost all those indicators have gotten better almost everywhere"


    "Even in countries that have had conflict, you’re still seeing tremendous improvements in health and education indicators."

  • Yes, the HIV/AIDS epidemic is a mess, but
    "In India, China and northern Africa, a concerted effort by governments and agencies changed the behaviour of entire populations. In Asia, basic primary health services were established, and the disease was frozen in its tracks."


    "In most of Africa, it was brought under control, with new-infection rates dropping off fast."

  • Yes, urban slums are a mess, but
    "[This decades great migration into cities has] had profound effects: It reduced poverty and malnutrition rates, because the largest killer of humans is rural poverty. It reduced global warming, because urban populations produce fewer emissions per capita than rural ones. And it reduced population-growth rates, because urbanized people everywhere have far fewer children."


    "there is now almost 100 per cent cable-TV penetration, 1.5 televisions per household and a DVD player for every three houses. Half of all homes have cellphone service and a third have computers, half of them with broadband Internet."


    "It is hard to find a slum-dweller or a rural villager, anywhere except the very most deprived patches of the world, without a cellphone in hand and a TV at home. In Mumbai, Lagos, Dhaka and Manila, cable and cellphones usually reach the shantytowns years before water and sewage do."

  • Yes, the world's food supply is a mess, but
    "Both China and India have more than enough stockpiles to keep their countries fed through a year-long drought. The world has more than enough fertile farmland to feed more than nine billion people well. Indeed, for the first half of this decade, food surpluses remained a widespread problem."

It should be pretty easy for the average denizen of TOD to see that most if not all of the above accomplishments were only made possible by the fact that more energy was consumed, more resources extracted, and more waste produced on this planet than at any other time in human history. Given the fact that we've only got the one planet it's also pretty easy to see that the exuberance that got us here won't last much longer.

It may well be all downhill from here:

But I think it's useful that this article reminds us that this is, after all, the peak, is it not? Are we not fortunate to be alive to witness the all-time greatest achievements of industrial civilization? As we celebrate the holidays and ring in the new year, let's not forget:

This may be as good as it gets, but for at least a few billion of us it has never been better.


Yeah, Jerry. Here we go again.


Here's to a happy new year, prosperous or not!

Nice graph.

If you include the colonial expansion of Europe then we have spent close to 1000 years taking things.

Recently from your graph its obvious that there is less to take so I call this the concentration period. New wealth is not really created instead existing wealth is concentrated.

Whats interesting is this period of concentration fits very well on top of the 1980's to later. Which overlaps the biggest revolution in technology the world has seen. This simple observation make the argument that technology will save us highly questionable.

In anycase the period of concentration with dwindling total wealth by its nature is short. I'm surprised its lasted as long as it has.

Next I'd argue we enter a period that to put it bluntly should be called kill. Not only do you take and concentrate you begin to removed or kill.

This period will hopefully be even shorter than the other ones.

And finally at this point if we are really lucky we might enter a period I'd call share.

But I doubt we do it until killing people is no longer capable of allowing wealth concentration to continue and sharing becomes the best way to accomplish concentration of wealth.

The period of killing and taking could be years decades or even centuries the sad thing is its self reinforcing and can provide fast returns despite being inefficient. A historical example is of course the conquering of the new world where the destruction of the native peoples brought immense wealth despite the fact a more peaceful sharing approach would have probably brought far more long term wealth.

Obviously we are all native Americans now. I doubt the conquers of a world full of people will have much problem removing the vermin to take the land.

RE: Ten years that shook, rattled, rolled and helped repair the world.

The article may seem overoptimistic, but as it points out, many of the disasters that were predicted for the last decade fizzled out and became non-events.

For the US, though, it was a pretty bad decade. It started off with the destruction of the World Trade Center towers by terrorists, and ended with the "global" economic meltdown. I have to put the word "global" in quotes, though, because as the article points out, it was mostly confined to the US and Europe. Even here in Canada, we became known as "The Country that Dodged the Bullet" because none of the banks went bankrupt and very few people defaulted on their mortgages.

The "global" economic crisis was a crisis only for people who had a mortgage worth more than their house and were trapped in a suburb with no public transit and no stores within walking distance. There weren't many people in the third world who fall into that category. Nobody has subprime mortgages to default on, and the price of oil doesn't affect people much if they are burning animal dung for fuel and walking to work. A banking crisis is not a problem if you don't have functioning banks.

People in developing countries have been alerted (via internet) that there is an energy crisis coming, and are taking steps to mitigate it. A lot of the countries are taking steps to electrify their railways and lock up any available oil and food supplies for the future. If governments don't provide adequate public transit or public telephones, you see hordes of minivans running around with 20-odd people inside and on the roof, each paying a few cents fare, and mobile phone towers sticking up above the rooftops everywhere. In the third world they have developed a lot of coping strategies that wouldn't work in the first world. And birth rates have dropped drastically in most major countries - they are paying attention to what is going on. Education of women is having a major effect.

The communications revolution has nothing to do with energy consumption. It takes very little power to run a cellphone, and not a lot to run a computer with high-speed internet. The big energy consumer in hot climates is air conditioning, and while there are a lot of mud huts with satellite dishes (and solar cells) on them, you don't see many air conditioners in the third world. And in that mud hut you will find someone with direct feed from CNN, BBC, and Al-Jazeera, and a better idea of what is going on in the rest of the world than the average American.

Information is the key to survival in the 21st century, and the truth is out there, live via satellite and the internet.

A down side of the burst in communication devices is that it opens more and more of the world up to commercializing by industry. All those hovels in Lagos...that now have TVs are now being exposed to shows displaying high-consuming lifestyles to which they will now aspire, not to mention endless direct product pushing from commercials.

The article also did not mention the explosion in slavery during the decade, now in the tens of millions, as I recall.